Snapchat and Disney will hog the earnings headlines

Snapchat and Disney will hog the earnings headlines

Disney set to prove its enduring ability to produce high-value intellectual property as Snapchat risk getting squeezed out of the digital advertising market

Both Snapchat and The Walt Disney Company report their earnings on August 07. The Disney report will be for the fiscal Quarter ending Jun 2018 while Snapchat reports their half-yearly earnings. Zacks Investment Research’s EPS forecast for Disney for the quarter is $1.97. The reported EPS for the same quarter last year was $1.58. The same analysts expect Snapchat to report earnings of $0.17 per share for the current fiscal quarter. Snap reported earnings of $0.16 per share during the same quarter last year, which would indicate a negative year-over-year growth rate of 6.3%.

Disney has moved significantly closer to completing their acquisition of Twenty-First Century Fox since their last report. The integration of Fox business is part of a wider plan to change their business over the coming years.

Box office successes like Black Panther, Avengers: Infinity War and Incredibles 2 confirm Disney’s ability to produce high-value intellectual property. However, challenges lie ahead. Disney’s media-network segment, its biggest profits source, posted a 6% earnings decline last quarter and boosted revenue at a sluggish 3% pace.

The subscriber base fell by about 3% as more of them switched to internet delivered home entertainment over cable packages. However, the report may show that those losses have stabilised. Disney’s new ESPN+ service will have been in operation for 4 months when the report comes out. This service is Disney’s boldest attempt to offer content directly to consumers. The report will show if this has successfully offset losses in the traditional network TV segment.

DISNEY HAS COMMITTED TO A STREAMING SERVICE

Disney has publicly committed to creating a streaming service. However, the direct-to-consumer platform is proving more expensive than expected. It took Netflix two years to achieve positive results in many of its services. It’s likely to take as long for Disney to achieve with their platform.

The long-term outlook for Disney remains positive. The intellectual property Disney will control after the Fox deal gives them an unmatched level of content quality. If that can be successfully married to their streaming service, it puts Disney in a strong position to face the challenges posed by Netflix and Amazon.

By contrast, the outlook for Snapchat isn’t as optimistic. Their first ‘shareholder meeting’ ended almost as soon as it began and consisted of a conference call that lasted less than three minutes. The three minutes were spent by a company lawyer reading a script on a recording. No questions were taken from investors and the only point of business was to elect Poppy Thorpe to the board of directors. Thorpe replaces venture capitalist Mitch Lasky.

According to CNBC’s half-time report, the outlook does not look great for Snapchat. Rather than drawing on Facebook’s jaw-dropping $119 billion fall in market value, the analyst pessimistically focused on Google’s earnings. Two weeks previously, Google reported incremental revenue over the first half of the year of $13 billion extra over the same period the previous year. By comparison, Snapchat’s revenue is $1.2 billion which leaves them vulnerable to being pushed out of the market for digital advertising by the likes of Google and Amazon.

Their unequivocal recommendation was “stay away”.

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